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This probably isn’t the week to be announcing transformative M&A — as infrastructure software provider NetScout has discovered the hard way. It announced a rare Reverse Morris Trust transaction on Monday where it would combine with the communications unit of the conglomerate Danaher, a key rival. In an RMT deal, one company will spin off a division and simultaneously merge it with a smaller company. The rub is that it remains tax-free to both companies and shareholders as long as the shareholders of the spinning conglomerate own a majority of the new company’s shares.
Here’s how NetScout shares have reacted since Monday.Continue reading: Reverse Morris Bust
After Bank of America settled litigation expenses with the Department of Justice over mortgage-related disputes for a record $16.7bn in August, investors were told that the worst was over. The focus would solely be on the future. Such promise was rewarded.
BofA shares rallied 10 per cent in the aftermath of the settlement up until the end of last month. That was double most of its rivals. JP Morgan stock was up 5 per cent, while Citigroup’s grew 4 per cent. There was confidence that the Charlotte-based bank was truly back on track.
But on Wednesday it emerged that its crisis-era mortgage troubles were not over yet. The $500m in reserves for legacy-related mortgage matters is small compared to the $70bn it has already agreed to pay over legal settlements. Still, it’s sizeable and leaves a cloud of uncertainty over the future of the bank.Continue reading: Bank of America: still uncertain future
Railroads, the industry that arguably contributed the most to United States prosperity in the 19th century, aren’t that glamorous anymore. However this week the industry is back in the news in a big way. CSX, one of seven big “Class I” railroads with operations in the US, is the potential acquisition target of Canadian Pacific, a top-tier rival. Both have equity values exceeding $30bn. A combination would create an unprecedented transcontinental railroad. CSX’s tracks are in the eastern United States, while CP’s lines are in the west and upper Midwest.
Commercial railroads are privately held in the US. ( The passenger service, Amtrak, is however owned by the government.) The industry is textbook example of a “natural” monopoly, with no more than two operators in any given region. Capital costs are high so it makes sense to organise the industry around a few titans with the scale to afford necessary investments.Continue reading: Workin’ on the railroad
Liquidity is tightening in the Chinese property sector. The cash calls have been trickling out, with three rights issues announced in the past few weeks (although Agile’s was shelved at the end of last week.)
So Country Garden’s issue – first out of the blocks and closed last Wednesday – should have been a good guide to sentiment towards the sector. But details of the take up, released on Monday, were perplexing.Continue reading: Country Garden: curiouser and curiouser